5 Tax Tips About Dependents
Who can you claim as a dependent on your 2008 tax returns? What exemptions are you eligible for? Is your spouse a dependent?
One of the best ways to save money this tax season is to claim the right deductions, but it can be confusing trying to figure them out. To help you start thinking about exemptions for dependents you are claiming this year, here are 5 tax tips about dependents.
1. Dependents may have to file their own tax return. Just because someone is claimed as a dependent does not necessarily mean they are out of the woods tax-wise. Despite being claimed as a dependent on someone else’s tax return, some people will still be required to file their own tax return. The IRS states that whether or not dependents need to file is based on the following criteria: the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Credit payments you received.
2. Exemptions for dependents reduce your taxable income. You can claim both personal exemptions and exemptions for dependents. For each dependent you have, you can deduct $3,500 on your 2008 tax return. If your adjusted gross income is above a certain level, your deductions may be reduced.
3. Dependents cannot claim exemptions. If you are claimed as a dependent on someone else’s tax return, you cannot claim a personal exemption on your own tax return, if you are required to file one.
4. Spouses are not considered dependents. If you are filing a joint return, you may claim one exemption for you and for your spouse, for a total of two. If you are filing a separate return, you can claim an exemption for your spouse only if they have no gross income, are not filing a joint return and are not claimed as a dependent for any other taxpayer.
5. Not everyone is eligible to be claimed as a dependent. In order to claim someone as a dependent, that person must be a U.S. citizen, resident alien, U.S. national or resident of Canada or Mexico. Some exceptions to these rules apply for adopted children. Additionally, under most circumstances, you cannot claim a married person as your dependent if they are filing a joint return with their spouse.
Making sure you understand the exemptions on your tax return is a good way to save money. As always, consult your tax advisor for full and complete information about what you are eligible to deduct and who you may be able to claim as a dependent on your returns.